NML Capital Ltd v Argentina

Factual and Procedural Background

The Plaintiff, a company incorporated in an offshore jurisdiction, purchased sovereign bonds issued by the Defendant in 2000. In December 2001 the Defendant declared a moratorium on all sovereign debt. Between 2001 and 2003 the Plaintiff’s affiliates bought bonds with a face value exceeding US $170 million at a substantial discount.

Relying on the bonds’ New York governing-law clause, the Plaintiff sued in a federal court in The City and, on 11 May 2006, obtained summary judgment for approximately US $284 million. The Plaintiff then commenced common-law proceedings in The State to enforce that judgment.

Permission to serve the Defendant (a foreign sovereign) outside the jurisdiction was granted ex parte on 2 April 2008. The Defendant applied to set aside service, asserting state immunity under the State Immunity Act 1978 (“the 1978 Act”). At first instance, Judge [Last Name] rejected the immunity defence. The Court of Appeal reversed that decision. The present appeal to the Supreme Court concerns whether the Defendant is immune from these enforcement proceedings.

Legal Issues Presented

1. Whether the enforcement proceedings are “proceedings relating to a commercial transaction” within the meaning of section 3(1)(a) of the 1978 Act.
2. Whether section 31 of the Civil Jurisdiction and Judgments Act 1982 (“the 1982 Act”) independently removes the Defendant’s immunity from recognition and enforcement of the foreign judgment.
3. Whether the bonds contain a pre-dispute submission to the jurisdiction of The State sufficient to waive immunity under section 2 of the 1978 Act.
4. Whether the Plaintiff was entitled, at the inter partes stage, to rely on grounds of non-immunity not advanced at the original ex parte service application.
5. Consequently, whether the Defendant enjoys state immunity in these proceedings.

Arguments of the Parties

Plaintiff's Arguments

• The English action to enforce the The City judgment “relates to” the underlying commercial bonds, bringing it within section 3(1)(a) of the 1978 Act.
• In any event, section 31 of the 1982 Act mandates recognition and enforcement of the foreign judgment because the Defendant would not have been immune had the original claim been brought in The State.
• The bonds include an express waiver of immunity and a submission to the jurisdiction of any court, including those of The State, for enforcement purposes.
• The so-called rule in Parker v Schuller should not bar reliance on new arguments; procedural flexibility better serves the overriding objective.

Defendant's Arguments

• The enforcement action concerns only the foreign judgment itself and therefore does not “relate to” a commercial transaction under section 3 of the 1978 Act.
• Section 31 of the 1982 Act adds an extra hurdle; the Plaintiff must still satisfy one of the specific immunity exceptions in sections 2–11 of the 1978 Act.
• The bond wording is insufficient, under the strict construction required by New York law, to amount to a submission to the jurisdiction of The State.
• The Plaintiff cannot advance new immunity arguments not relied on at the ex parte stage; the rule in Parker v Schuller requires service to be set aside.

Table of Precedents Cited

Court's Reasoning and Analysis

Issue 1 – Section 3(1)(a). The majority gave “relating to” a broad, contemporary meaning. Because the enforcement suit is inseparable from the commercial bonds that generated the The City judgment, the proceedings fall within the commercial-transaction exception and the Defendant enjoys no immunity.

Issue 2 – Section 31 (1982 Act). Even if section 3 were inapplicable, section 31 supplies an independent basis to refuse immunity. The statute requires recognition of foreign judgments where, mutatis mutandis, an English court applying sections 2–11 of the 1978 Act would find no immunity. That threshold is met because the underlying dispute is commercial.

Issue 3 – Contractual Submission. The bonds’ waiver clause states that any “related judgment” may be enforced in any court to whose jurisdiction the Defendant “is or may be subject.” Given the availability of service under CPR 6BPD 3.1(10), the Defendant may be subject to English jurisdiction; therefore the clause constitutes an advance submission and waiver under section 2(2) of the 1978 Act.

Issue 4 – Procedural Objection. The court overruled the rigid application of Parker v Schuller. Modern procedural rules and the overriding objective favour allowing alternative, legally valid grounds for resisting immunity to be raised at the inter partes stage where no prejudice is caused.

Overall. Any one of the first three grounds defeats immunity. The procedural objection fails. Accordingly the Defendant cannot rely on state immunity to resist enforcement.

Holding and Implications

APPEAL ALLOWED. The Defendant is not entitled to state immunity in these proceedings; the Plaintiff may pursue recognition and enforcement of the The City judgment in The State.

Practical implications include: (i) confirmation that section 3(1)(a) of the 1978 Act extends to enforcement actions on foreign judgments rooted in commercial transactions; (ii) affirmation that section 31 of the 1982 Act provides a comprehensive framework for recognising such judgments; (iii) judicial endorsement of broad, advance waivers of immunity in sovereign bond documentation; and (iv) modernisation of procedural practice, reducing technical barriers to justice. No new precedent on execution against state assets was set, but the judgment strengthens creditors’ ability to enforce sovereign debt in English courts.